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Phoenix Industries closes in Crookston, leaving city with unpaid $157,000 loan

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GRAND FORKS, N.D. - Phoenix Industries, one of Crookston's major employers for more than two decades, has shut its doors and apparently gone out of business, said the mayor and other city leaders.

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Phoenix owes the city almost $104,000 through a federally backed business loan program.

Ralph Pester, chairman of Phoenix's board, said told The Herald he had no comment.

Company Manager Marcel Champagne did not return a call Monday.

Mayor Dave Genereux said it's all a mystery to the city.

"We have gotten no response from anybody," he said.

"We are all drawing conclusions," said Dan Johanneck, executive director of the Crookston Housing and Economic Development Authority. "They haven't really made any of us aware of anything. It appears they are not operational anymore, but I haven't heard anything official from them."

Within the past few years, Phoenix had 100 or more employees, one of the largest employers in the city of 8,200. But after losing a major contract several months ago, all but about 20 were laid off, city officials said.

Started by local investors, Phoenix began in Crookston making blades for wind generators in the 1980s and changed its product mix and marketing over the years, more recently making fiberglass and plastic parts for manufacturers such as New Flyer Industries, the bus plant in Crookston.

The loss last year of a major contract with New Flyer led to laying off two-thirds or more of Phoenix employees, said a Crookston business leader with knowledge of the situation. When the Canadian dollar became equivalent in value to the U.S. dollar last year, New Flyer, a Canadian company, found a Canadian supplier for the parts Phoenix had been making.

By this month, when the company closed its doors, shutting down even its Web site, there were only about 20 people still working.

Phoenix owes the city money, too, through an unsecured loan, Genereux said.

Through a U.S. Department of Agriculture's Intermediary Relending Program, or IRP, the city in 2003 loaned Phoenix $150,000 for capital expansion, said Betty Arvidson, city clerk/treasurer. Phoenix promised to hire 15 more people because of the loan, which would have brought its workforce to 104, Arvidson said.

The company was allowed to delay repaying the loan until May 2005 when the balance had grown to $157,500, then made payments regularly until the past few months, when it fell behind, Arvidson said.

The IRP program has been a big success overall, she said.

It began in the mid-1990s when the city borrowed $800,000 from USDA at 1 percent interest over 30 years. The city relends the money to local businesses.

About 10 other companies are on the city's books and they all stay current on the loans, she said.

Phoenix had the biggest loan in the program.

Often, the city does get security or collateral on the IRP loans, but not in the case of Phoenix, Arvidson said.

Mayor Genereux said "we are the last people on the block to get paid, because that's what our mission was, to try to help some local manufacturers."

Phoenix's investors and board members when it got the loan in 2003 included Pester and then CEO Champagne; former Chancellor of the University of Minnesota-Crookston Don Sargent; Allan Dragseth, who, like Pester, is a farmer; and Larry Altringer, who is the treasurer and manufacturing representative on the board of CHEDA.

Phoenix does not have any loans with CHEDA, Johanneck said.

Mayor Genereux said Phoenix had been struggling for some time, trying to find new investment money or even a buyer.

He said it appears the latest slowdown in the economy was the "straw that broke the camel's back."

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